Identify each cost as a period cost or a product cost. If it is a product cost, further indicate if the cost is direct materials, direct labor, or manufacturing overhead. Then, determine if the product cost is a prime cost and/or a conversion cost.

Product cost are those cost which are main component of producing product

that is direct material cost,direct labor cost and manufacturing overhead cost without it product cannot be produced.

Direct material:

Suppose we are producing a toy, we would need plastic,which is identifiable in final product.

Direct labor:

Directly engaged in joining and fitting hands of toys are those labors,whom are also very important.

Manufacturing overhead:

Manufacturing overhead are those indirect material and indirect labor which are not directly but indirectly involved in producing units.Suppose salaries and wages of guard,cost of polishing toys and other factory utilities.

Direct material and direct labor are product cost because they are directly engaged in production ,they are part of manufacturing cost ,while

Period cost are necessary for manufacturing units but they are considered non-manufacturing cost and are expense out for that period.This includes marketing expense,Audit fees,rent of building.

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